Derived, as our public revenue is, in chief part from duties on imports, its magnitude affords gratifying evidence of the prosperity, not only of our commerce, but of the other great interests upon which that depends.

The principle that all moneys not required for the current expenses of the Government should remain for active employment in the hands of the people and the conspicuous fact that the annual revenue from all sources exceeds by many millions of dollars the amount needed for a prudent and economical administration of public affairs can not fail to suggest the propriety of an early revision and reduction of the tariff of duties on imports. It is now so generally conceded that the purpose of revenue alone can justify the imposition of duties on imports that in readjusting the impost tables and schedules, which unquestionably require essential modifications, a departure from the principles of the present tariff is not anticipated.

The Army during the past year has been actively engaged in defending the Indian frontier, the state of the service permitting but few and small garrisons in our permanent fortifications. The additional regiments authorized at the last session of Congress have been recruited and organized, and a large portion of the troops have already been sent to the field. All the duties which devolve on the military establishment have been satisfactorily performed, and the dangers and privations incident to the character of the service required of our troops have furnished additional evidence of their courage, zeal, and capacity to meet any requisition which their country may make upon them. For the details of the military operations, the distribution of the troops, and additional provisions required for the military service, I refer to the report of the Secretary of War and the accompanying documents.

Experience gathered from events which have transpired since my last annual message has but served to confirm the opinion then expressed of the propriety of making provision by a retired list for disabled officers and for increased compensation to the officers retained on the list for active duty. All the reasons which existed when these measures were recommended on former occasions continue without modification, except so far as circumstances have given to some of them additional force.

The recommendations heretofore made for a partial reorganization of the Army are also renewed. The thorough elementary education given to those officers who commenced their service with the grade of cadet qualifies them to a considerable extent to perform the duties of every arm of the service; but to give the highest efficiency to artillery requires the practice and special study of many years, and it is not, therefore, believed to be advisable to maintain in time of peace a larger force of that arm than can be usually employed in the duties appertaining to the service of field and siege artillery. The duties of the staff in all its various branches belong to the movements of troops, and the efficiency of an army in the field would materially depend upon the ability with which those duties are discharged. It is not, as in the case of the artillery, a specialty, but requires also an intimate knowledge of the duties of an officer of the line, and it is not doubted that to complete the education of an officer for either the line or the general staff it is desirable that he shall have served in both. With this view, it was recommended on a former occasion that the duties of the staff should be mainly performed by details from the line, and, with conviction of the advantages which would result from such a change, it is again presented for the consideration of Congress.

The report of the Secretary of the Navy, herewith submitted, exhibits in full the naval operations of the past year, together with the present condition of the service, and it makes suggestions of further legislation, to which your attention is invited.

The construction of the six steam frigates for which appropriations were made by the last Congress has proceeded in the most satisfactory manner and with such expedition as to warrant the belief that they will be ready for service early in the coming spring. Important as this addition to our naval force is, it still remains inadequate to the contingent exigencies of the protection of the extensive seacoast and vast commercial interests of the United States. In view of this fact and of the acknowledged wisdom of the policy of a gradual and systematic increase of the Navy an appropriation is recommended for the construction of six steam sloops of war.

In regard to the steps taken in execution of the act of Congress to promote the efficiency of the Navy, it is unnecessary for me to say more than to express entire concurrence in the observations on that subject presented by the Secretary in his report.

It will be perceived by the report of the postmaster-General that the gross expenditure of the Department for the last fiscal year was $9,968,342 and the gross receipts $7,342,136, making an excess of expenditure over receipts of $2,626,206; and that the cost of mail transportation during that year was $674,952 greater than the previous year. Much of the heavy expenditures to which the Treasury is thus subjected is to be ascribed to the large quantity of printed matter conveyed by the mails, either franked or liable to no postage by law or to very low rates of postage compared with that charged on letters, and to the great cost of mail service on railroads and by ocean steamers. The suggestions of the Postmaster-General on the subject deserve the consideration of Congress.

The report of the Secretary of the Interior will engage your attention as well for useful suggestions it contains as for the interest and importance of the subjects to which they refer.